A commentary on the European Commission’s change of course on the CSRD
Wake-up call or course correction?
The EU was for a long time a pioneer when it came to the binding anchoring of sustainability in corporate action. With the CSRD (Corporate Sustainability Reporting Directive) and the associated European Sustainability Reporting Standards (ESRS), Brussels aimed at nothing less than rewriting the rules of the economy – away from purely financial thinking and toward double materiality, which takes ecological and social impacts just as seriously as financial risks and opportunities.
With the Omnibus simplification package published in February 2025 – officially COM (2025) 81 final – the Commission is now making a clear adjustment of course. The draft provides for far-reaching changes which, under the heading of “relief,” reduce bureaucracy but at the same time also bring a noticeable reduction in substance.
This raises the question: Are we witnessing a turning point in European sustainability policy here – or a necessary readjustment to make sustainability viable in the long term?
These are the recommended adjustments:
- Elimination of sector-specific ESRS standards: The publication of originally planned, sector-specific reporting standards is to be dropped. These were intended to provide a decisive instrument for comparability, relevance and precision in reporting.
- Retention of “limited assurance”: Instead of moving to more in-depth “reasonable assurance” as planned, sustainability information will permanently remain subject to only a superficial, limited review.
- Increase in thresholds: In future, the reporting obligation is to apply only to companies with more than 1,000 employees, and the balance sheet totals and revenue thresholds will rise significantly (EUR 25 million balance sheet total and EUR 50 million revenue respectively).
- Postponement of application dates: Companies that would have become subject to reporting from 2026 or 2027 (in particular SMEs, non-capital market participants and subsidiaries) will receive a two-year extension.
The rationale: reducing bureaucracy and easing the burden on SMEs
The European Commission justifies the proposal by citing the high administrative effort and the lack of implementation readiness in many Member States. Companies have had too little time to prepare for the new obligations. For small and medium-sized enterprises in particular, the complexity is not manageable.
In practice, this is not entirely wrong – many companies are struggling with implementing the materiality assessment, data collection and governance structures for reporting. But instead of creating targeted support, the Commission is opting for rollback. The message: We will make it easier for now – and at the same time less precise.
The criticism: a step backward with a signaling effect
Reactions from civil society, the financial sector and large parts of the business community range from relieved to critical to alarmed:
- Loss of comparability: Without sector-specific standards, there is a risk of arbitrary, not very robust reports in which companies compile the relevant topics themselves – and simply omit uncomfortable truths.
- Loss of quality in assurance: The permanent retention of “limited assurance” prevents a credible assurance regime. This puts the credibility of the reports at risk.
- Dangerous signals for investors: The financial markets in particular need consistent, auditable ESG data. However, the Omnibus proposal sends the signal that sustainability is no longer binding, but voluntary.
- Contradiction with the Taxonomy and the SFDR: EU sustainability policy is based on a coherent data framework. If a central pillar such as the CSRD is weakened, the other instruments also begin to wobble.
Is sustainability over now?
No – but the political tailwind is getting weaker. The Omnibus package is not the end of sustainability, but it is a setback for all those who relied on clear, reliable standards. It is a step backward in political commitment that could lead to a certain demobilization not only at EU level, but also in the Member States.
What remains is the responsibility of the companies themselves. Because many requirements – for example from investors, customers or international regulations (e.g. SEC, ISSB) – remain in place. In addition, sustainability will continue to gain importance in the reality of markets and supply chains. Anyone who now only meets the legal minimum is acting with short-term business judgment.
Conclusion: an opportunity for voluntary commitment
The Omnibus package could, paradoxically, usher in a new phase of sustainability in which it is no longer only about compliance with legal obligations, but about strategic self-responsibility. Companies that take sustainability seriously should not sit back, but should now all the more demonstrate that they actively shape the path of transformation even without regulatory pressure.
A proactive, self-determined approach can not only help prepare early for future requirements, but also strengthen your own position in the market. The time gained can be used productively to reflect on existing strategies and processes and adapt them sustainably.
Because: Sustainability is not a reporting topic.
What does the CSRD mean in practice? Take a look at our online event on this topic: CSRD und Nachhaltigkeitsstrategien